- New Prime Inc. has agreed to settle two misclassification lawsuits for $28 million (Oliveira v. New Prime Inc., No. 1:15-cv-10603 (D. Mass., July 20, 2020)).
- The parties spent more than five years in court, a stint that included a trip to the U.S. Supreme Court over the applicability of an arbitration agreement.
- The truck drivers had alleged the company misclassified them as independent contractors and failed to pay them for time spent in classroom orientation and driving, in violation of the Fair Labor Standards Act (FLSA) and state law. Each of the 40,000 class members may receive at least $100, according to the agreement, which still needs a court's final approval.
The parties' intent when entering into an employment arrangement has little bearing on the employee versus independent contractor analysis. A U.S. Department of Labor (DOL) fact sheet on the FLSA states that an independent contractor agreement between the employer and the worker does not make an employee an independent contractor. And in 2019, an Alabama federal district court held that a signed independent contractor acknowledgment form wasn't enough for an employer to overcome a delivery driver's claims that he was an employee.
Instead, enforcement authorities require that employers base employee or independent contractor classification on specific tests, which can vary by jurisdiction. These tests, however, generally turn on how much control an employer exerts, or maintains the right to exert, over the work and the working conditions. Generally, the more control, the more likely it is that the worker will be an employee.
DOL has said enforcement of the issue is important because misclassified employees "often are denied access to critical benefits and protections they are entitled to by law," including overtime and minimum wage protections, family and medical leave, unemployment insurance and certain safe workplace laws. And recoveries can be substantial: Flowers Foods, which says it is one of the largest producers of packaged baked goods in the country, recently agreed to pay $9 million to settle allegations that it misclassified its distributors as independent contractors.